Key Notes for December 15th
- Japan Tankan manufacturing index 12 vs. 13; non-manufacturing index 16 vs. 14
- Shinzo Abe’s LDP party wins majority in the snap elections held on 14th December
- Australia mid- year economic and fiscal outlook report
- Switzerland PPI m/m -0.7% vs. 0.2% estimates
- CBI trends total orders 7 vs. 3
- US Empire state manufacturing index -3.6 vs. 12
The markets opened after the weekend with the Asian/Pacific currencies seeing some volatility. The Japanese Yen was influenced by the weekend elections as well as fundamentals. Overall, what would have been bearish for the Yen based on Abe’s election victory instead saw the Yen strengthen during the early trading session. Demand for the safe haven grew on news of a hostage crisis in Sydney, Australia.
The Australian government today unveiled its economic and fiscal report which painted a bleak picture with the trade deficit likely to expand to as much as $33.2 billion in the year to June, well above the initial estimates but the government expects that the debt to GDP ratio will remain low. The Aussie was mixed on the report alongside the hostage crisis which seems to be a developing story.
The European trading session remained relatively quiet with not much of economic releases. ECB’s Nowotny , commenting on the ECB’s policy today said that that question of purchasing bonds will largely depend on the economic situation, but that the ECB governing council was unanimous to do more if need be. Being specific on the question of bond purchases, he ruled out bond buying from the primary markets and instead the ECB would likely to focus on the secondary bond markets to purchase bonds. It is quite likely that the bond purchases would first start with corporate bonds while the larger question of purchasing sovereign bonds, a decision which is likely to be taken during the March 2015 policy meeting. The Euro was weaker during the session after it broke down from the support/resistance level of 1.243 regions, with a possibility to potentially test 1.23695.
The German Bundesbank which released its monthly report was also found to be toeing the general consensus confirming that the ECB council was unanimous to agreeing for additional easing measures if need be including changing the scope pace and composition of the ECB measures starting next year. However, there was no particularly specific reference to the idea of ECB purchasing the sovereign bonds.
The British Pound was weak after the pair posted steep declines in intraday trading. The pair reversed gains after rallying to the daily resistance level at 1.5744 and was seen trading near 1.566 levels ahead of the US trading session open.
The Empire state manufacturing index came out weaker with -3.6 against expectations of a rise to 12 after last month’s decline to 10.16. The latest reading is the lowest since 2013. The Greenback was relatively unchanged on the news and continued to be broadly mixed across the board ahead of the industrial production data.